Privatisation on its own can be dangerous, workshop told

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By Alan Finlay for APCNews

JOHANNESBURG, South Africa, 29 July 2008

Privatisation without regulation does not necessarily improve service delivery, and may even decrease access to ICTs for the poor. This is the view of US-based academic and ICT policy analyst Robert Horwitz, who was speaking at a one-week CICEWA workshop held in Johannesburg in July 2008. CICEWA (“see-say-wah”) is a new project by APC and KICTANet that seeks to identify the political obstacles to extending affordable access to ICT infrastructure in Africa – and to advocate for their removal.

CICEWA workshop, Johannesburg, July 2008The research workshop was attended by ICT researchers, journalists and advocates from several African countries, such as Cameroon, Kenya, Rwanda, Senegal and Tanzania.

Post-apartheid telecoms

Horwitz is no newcomer to South Africa, or to the politics behind antennas, cables and wires. He played a role in the multi-stakeholder process that led to the first post-apartheid telecommunications policy development process. He was also a co-author – with the Association for Progressive Communications’ ICT policy manager Willie Currie – of a paper detailing the process that led to the privatisation of South African incumbent and telecoms giant Telkom.

As Horwitz and Currie argue in the paper, the far-reaching policy consensus achieved in the mid-to-late 1990s in South Africa, was effectively undermined during Telkom’s privatisation process, in part due to the new ANC government’s desire to make South Africa attractive as a foreign investment destination.

Finding and pushing for a pragmatic system

One of the key tasks of the CICEWA network is for the project participants to embark on an investigative journalism-like research process to uncover exactly how their own telecommunications policy and legislative process has unfolded over time. For this, the Telkom paper served as a working model.

Many issues in telecommunications policy development tend to remain constant, but have different “variations and wrinkles”, Horwitz said. These included the issues of competition, state involvement, control and ownership versus market freedoms, and pricing. “These were there at the beginning of telephony,” he said, adding that the dominant model changes over time.

“The point is to find a pragmatic system,” he said. “For a long time, there was a state-ownership model. We are at a turning point with the potential for a new pragmatism; with the potential for a mixed system.”
Competition in principle creates potential for providers to be efficient, and entrepreneurial, he said. “Without competition, PTTs [post and telecommunications entities] often became reservoirs for employment, favoured political actors, and appointed managers that collected high salaries”. They were often “sluggish and did not innovate” and “tended to jealously guard their prerogative to prevent others from providing telecommunications services,” Horwitz explained.

No such thing as a free market

The goal of liberalisation was for any company to provide any service, largely without regulatory inhibitions. But Horwitz insisted that it was not a question of talking about a “free market”; rather it was a question of “managed competition”. “There is no such thing as free market,” he explained. “When markets are free and unregulated, they often fail, sometimes spectacularly.”

The idea behind liberalisation was that competition would keep prices low, and create an environment for technological and service innovation. Where there was a problem, the regulator would solve it. He said that although there were challenges with liberalisation, these were largely transitional problems.

However Horwitz added that there were sometimes tensions between privatisation and liberalisation. In South Africa, the sale of a 30% stake in Telkom to Telkom Malaysia and SBC Communications by ministerial decree, led to a private-sector monopoly, rather than liberalisation. In this way, the gains of the policy process of the 1990s were sabotaged.

“The choice of privatisation over liberalisation led to the entrenchment of the incumbent operator, and a shareholders agreement and related contracts that gave the equity partner the power to obstruct competition. The result of the sabotage to the white paper was to create a publicly protected private monopoly,” he said.

Taking it to LAC

Back in their respective countries, the CICEWA workshop participants are expected to come up with their own analysis of their country’s telecom landscape. Based on their research, ICT policy advocates will lobby for change in their respective regions: GOREeTIC in West and Central Africa, KICTANet in East Africa.

Interestingly, the project is also about to be implemented in the Latin American region too. One of the workshop participants, APC’s Valeria Betancourt, will coordinate the CICEWA sister project in that region, called CILAC.

“The composition of the network will, without a doubt, be distinct […] But with regards to the content of CICEWA and CILAC, similarities and coincidences are abundant,” Betancourt points out. “It’s clear that the telecommunications reform process, in the context of developing countries (like those of Africa and Latin America & the Caribbean), faced similar problems and also produced analogous consequences.”